In the past week Ukraine International Airlines quietly joined Lufthansa Group’s skirmish with the middlemen who distribute airfares through most travel agencies worldwide.

As of April 19, it is adding a $9 fee per segment for bookings made through the four global distribution systems — Amadeus, SabreTravelport, and Travelsky — that process nearly all airline tickets worldwide that are not sold directly by airlines through their own websites or online agency portals.

The move represents a bit of changed course for the Ukrainian carrier. Last year it signed up to use Amadeus’s software to help sell their ancillary services, such as meals and bags, via travel agencies. Now it will be taxing tickets if they’re sold via agents who use Amadeus’s reservation systems to book tickets.

Lufthansa Group’s fee is $17 (16 euro) per ticket booked via those companies.

Despite the “tax,” a substantial majority of tickets are still being booked via the middlemen, the airline group says. It paid about a half billion dollars in costs to the middlemen in 2016, according to estimates by investment banks.

It is notable that an airline as small as Ukraine would take the risk of losing some business to pursue this commercial strategy. The conventional wisdom in the industry was that only an airline group the size of Lufthansa would feel the risks of losing some business in the most popular distribution channels would outweigh the benefits of avoiding the fees that GDSs bake into the cost of their contracts.

International Airlines Group, parent company of British Airways and Iberia, may make a similar move to Lufthansa Group’s and Ukraine’s by year-end, according to interviews on a background basis that Skift did with industry executives and investment analysts.

Tipping point?

In a 100-page report on Amadeus published April 7, Credit Suisse analysts, led by Neil Glynn say: “We firmly expect peer airlines, such as Air France-KLM and IAG, will follow Lufthansa in attempting to disintermediate Amadeus and its fellow Global Distribution Systems (GDSs).”

The analysts expect the changes in strategy – signaling their intent to drive business away from Amadeus and its GDS peers – will be revealed later this year.

On March 16, Lufthansa Group chief executive Carsten Spohr echoed the sentiment: “We also believe it’s only a question of time when others will follow…..what we hear in the industry. And with the business success of Lufthansa, I’d be very surprised if others will not follow”.

Amadeus is the largest of the GDSs, especially in the European market, and may be the most affected by the moves by Lufthansa and Ukraine International.

The Credit Suisse analysts estimate Lufthansa, Air France-KLM, and IAG (parent company of British Airways and Iberia) cumulatively represent 15 percent of Amadeus’s largest distribution customers.

Overstated risks?

Yet despite that buying power, Credit Suisse estimates that a five percent volume shift in airline ticket sales out of the GDSs would mean only about $53 million (50 million euro) drop in contribution to Amadeus’s distribution business.

The analysts add: “We expect Air France-KLM and IAG will… look to shift at least 10 percent of volume from the GDSs in order to justify their efforts (less would not be worth the effort given potentially unwinding full content agreement discounts could drive GDS costs per booking up 25 percent.”

So how significant is the threat to Amadeus — and its GDS peers?

On the one hand, that division represents two-thirds of Amadeus’ revenue and half of the company’s annual contribution to earnings.

Yet in the context of Amadeus’s $21.29 billion market capitalization, that is small hit that the company could theoretically manage by growing its new businesses, which include software services for airlines and hotels. (A similar contextual point could be drawn about Amadeus’s peer companies.)

What’s more, Credit Suisse has taken the most negative approach to forecasting the possible impact of airline disintermediation on Amadeus and its peers. Other analysts have been more sanguine.

In short, it may take airlines so long to shift share out of the GDS channel, and they may only be modestly successful in doing so, in which case the companies that run the GDSs may have shifted into new businesses by that time and become less dependent on them.

Lufthansa’s fee is still being contested in a lawsuit in a Texas court filed by one of the middlemen, Sabre. The fee has also been challenged by a lobbying arm of national travel agents’ and tour operators’ associations within the European Union, who filed an appeal in 2015 to the EU Commission’s watchdog body to intervene. Both cases are still unresolved.

But apparently Ukraine International feels confident that the wind will be at its back in its move.

Photo Credit: Ukraine International is the second airline company after Lufthansa Group to tack on a charge to bookings made via global distribution systems. Ukrainian International